12 CFR 5.21 – Federal mutual savings association charter and bylaws
(a) Authority. 12 U.S.C. § 1462a, 1463, 1464, and 2901 et seq.
Terms Used In 12 CFR 5.21
- Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Bequest: Property gifted by will.
- Contract: A legal written agreement that becomes binding when signed.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Devise: To gift property by will.
- Fiduciary: A trustee, executor, or administrator.
- Fiscal year: The fiscal year is the accounting period for the government. For the federal government, this begins on October 1 and ends on September 30. The fiscal year is designated by the calendar year in which it ends; for example, fiscal year 2006 begins on October 1, 2005 and ends on September 30, 2006.
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Indemnification: In general, a collateral contract or assurance under which one person agrees to secure another person against either anticipated financial losses or potential adverse legal consequences. Source: FDIC
- Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
- Mortgage: The written agreement pledging property to a creditor as collateral for a loan.
- Quorum: The number of legislators that must be present to do business.
- Statute: A law passed by a legislature.
(b) Licensing requirements. A Federal mutual savings association must file an application, notice, or other filing as prescribed by this section when adopting or amending its charter or bylaws.
(c) Scope. This section describes the procedures and requirements governing charters and bylaws for Federal mutual savings associations.
(d) Exceptions to rules of general applicability. Notwithstanding any other provision of this part, §§ 5.8 through 5.11 do not apply to this section.
(e) Charter form. Except as provided in paragraphs (f) and (g) of this section, a Federal mutual savings association must have a charter in the following form. A charter for a Federal mutual savings bank must substitute the term “savings bank” for “association.” The term “trustee” may be substituted for the term “director.” Associations adopting this charter with existing borrower members must grandfather those borrower members who were members as of the date of issuance of the new charter by the OCC. Such borrowers will have one vote for the period of time such borrowings are in existence.
Section 1. Corporate title. The full corporate title of the Federal savings association is ___.
Section 2. Office. The home office is located in ___ [city, state].
Section 3. Duration. The duration of the association is perpetual.
Section 4. Purpose and powers. The purpose of the association is to pursue any or all of the lawful objectives of a Federal mutual savings association chartered under section 5 of the Home Owners’ Loan Act and to exercise all the express, implied, and incidental powers conferred thereby and by all acts amendatory thereof and supplemental thereto, subject to the Constitution and laws of the United States as they are now in effect, or as they may hereafter be amended, and subject to all lawful and applicable rules, regulations, and orders of the Office of the Comptroller of the Currency (“OCC”).
Section 5. Capital. The association may raise capital by accepting payments on savings and demand accounts and by any other means authorized by the OCC.
Section 6. Members. All holders of the association’s savings, demand, or other authorized accounts are members of the association. In the consideration of all questions requiring action by the members of the association, each holder of an account is permitted to cast one vote for each $100, or fraction thereof, of the withdrawal value of the member’s account. No member, however, may cast more than 1,000 votes. All accounts are nonassessable.
Section 7. Directors. The association is under the direction of a board of directors. The authorized number of directors may not be fewer than five nor more than fifteen persons, as fixed in the association’s bylaws, except that the number of directors may be decreased to a number less than five or increased to a number greater than fifteen with the prior approval of the OCC.
Section 8. Capital, surplus, and distribution of earnings. The association will maintain for the purpose of meeting losses the amount of capital required by section 5 of the Home Owners’ Loan Act and by regulations of the OCC. The association will distribute net earnings on its accounts on such basis and in accordance with such terms and conditions as may from time to time be authorized by the OCC: Provided, That the association may establish minimum-balance requirements for accounts to be eligible for distribution of earnings. All holders of accounts of the association will be entitled to equal distribution of assets, pro rata to the value of their accounts, in the event of voluntary or involuntary liquidation, dissolution, or winding up of the association. Moreover, in any such event, or in any other situation in which the priority of such accounts is in controversy, all such accounts will, to the extent of their withdrawal value, be debts of the association having the same priority as the claims of general creditors of the association not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the association.
Section 9. Amendment of charter. Adoption of any preapproved charter amendment will be effective after such preapproved amendment has been approved by the members at a legal meeting. Any other amendment, addition, change, or repeal of this charter must be approved by the OCC prior to approval by the members at a legal meeting, and will be effective upon filing with the OCC in accordance with regulatory procedures.
(f) Charter amendments. In order to adopt a charter amendment, a Federal mutual savings association must comply with the following requirements:
(1) Board of directors approval. The board of directors of the association must adopt a resolution proposing the charter amendment that states the text of such amendment;
(2) Form of filing—(i) Application requirement. Except as provided in paragraph (f)(2)(ii) of this section, a Federal mutual savings association must file the proposed charter amendment with, and obtain the prior approval of, the OCC.
(A) Expedited review. Except as provided in paragraph (f)(2)(i)(B) of this section, the charter amendment will be deemed approved as of the 30th day after filing, unless the OCC notifies the filer that the amendment is denied or that the amendment contains procedures of the type described in paragraph (f)(2)(i)(B) of this section and is not eligible for expedited review, provided the association follows the requirements of its charter in adopting the amendment.
(B) Amendments exempted from expedited review. Expedited review is not available for a charter amendment that would render more difficult or discourage a merger, proxy contest, the assumption of control by a mutual account holder of the association, or the removal of incumbent management; or involve a significant issue of law or policy.
(ii) Notice requirement. No application under paragraph (f)(2)(i) of this section is required if the text of the amendment is contained within paragraphs (e) or (g) of this section. In such case, the Federal mutual savings association must submit a notice with the charter amendment to the OCC within 30 days after adoption.
(3) Effectiveness. A charter amendment is effective after approval by the OCC, if required pursuant to paragraph (f)(2) of this section, and adoption by the association, provided the association follows the requirements of its charter in adopting the amendment.
(g) Optional charter amendments. The following charter amendments are subject to the notice requirement in paragraph (f)(2)(ii) of this section if adopted without change:
(1) Purpose and powers. Add a second paragraph to section 4, as follows:
Section 4. Purpose and powers. * * * The association has the express power: (i) To act as fiscal agent of the United States when designated for that purpose by the Secretary of the Treasury, under such regulations as the Secretary may prescribe, to perform all such reasonable duties as fiscal agent of the United States as may be required, and to act as agent for any other instrumentality of the United States when designated for that purpose by any such instrumentality; (ii) To sue and be sued, complain and defend in any court of law or equity; (iii) To have a corporate seal, affixed by imprint, facsimile or otherwise; (iv) To appoint officers and agents as its business requires and allow them suitable compensation; (v) To adopt bylaws not inconsistent with the Constitution or laws of the United States and rules and regulations adopted thereunder and under this Charter; (vi) To raise unlimited capital by accepting payments on savings, demand, or other accounts, as are authorized by rules and regulations made by the OCC, and the holders of all such accounts or other accounts as will, to such extent as may be provided by such rules and regulations, be members of the association and will have such voting rights and such other rights as are thereby provided; (vii) To issue notes, bonds, debentures, or other obligations, or securities, provided by or under any provision of Federal statute as from time to time is in effect; (viii) To provide for redemption of insured accounts; (ix) To borrow money without limitation and pledge and otherwise encumber any of its assets to secure its debts; (x) To lend and otherwise invest its funds as authorized by statute and the rules and regulations of the OCC; (xi) To wind up and dissolve, merge, consolidate, convert, or reorganize; (xii) To purchase, hold, and convey real estate and personalty consistent with its objects, purposes, and powers; (xiii) To mortgage or lease any real estate and personalty and take such property by gift, devise, or bequest; and (xiv) To exercise all powers conferred by law. In addition to the foregoing powers expressly enumerated, this association has the power to do all things reasonably incident to the accomplishment of its express objects and the performance of its express powers.
(2) Title change. A Federal mutual savings association that complies with § 5.42 may amend its charter by substituting a new corporate title in section 1.
(3) Home office. A Federal mutual savings association may amend its charter by substituting a new home office in section 2, if it has complied with applicable requirements of § 5.40.
(4) Maximum number of votes. A Federal mutual savings association may amend its charter by substituting any number of votes per member between 1 and 1000 in section 6.
(h) Reissuance of charter. A Federal mutual savings association that has amended its charter may apply to have its charter, including the amendments, reissued by the OCC. Such request for reissuance should be filed at the appropriate OCC licensing office and contain signatures required under paragraph (e) of this section, together with such supporting documents as may be needed to demonstrate that the amendments were properly adopted.
(i) Availability of chartering documents. A Federal mutual savings association must make available a true copy of its charter and bylaws and all amendments thereto to accountholders at all times in each office of the savings association, and must upon request deliver to any accountholders a copy of such charter and bylaws or amendments thereto.
(j) Bylaws for Federal mutual savings associations—(1) In general. A Federal mutual savings association must operate under bylaws that contain provisions that comply with all requirements specified by the OCC in this paragraph and that are not otherwise inconsistent with the provisions of this paragraph; the association’s charter; and all other applicable laws, rules, and regulations provided that, a bylaw provision inconsistent with the provisions of this paragraph may be adopted with the approval of the OCC. Bylaws may be adopted, amended or repealed by a majority of the votes cast by the members at a legal meeting or a majority of the association’s board of directors. The bylaws for a Federal mutual savings bank must substitute the term “savings bank” for “association”. The term “trustee” may be substituted for the term “director”.
(2) Requirements. The following requirements are applicable to Federal mutual savings associations:
(i) Annual meetings of members. (A) An association must provide for and conduct an annual meeting of its members for the election of directors and at which any other business of the association may be conducted. Such meeting must be held at any convenient place the board of directors may designate, and at a date and time within 150 days after the end of the association’s fiscal year. The association’s bylaws may provide for telephonic or electronic participation of members at an annual meeting. Members participating in an annual meeting telephonically or electronically will be deemed present in person for purposes of the quorum requirement in paragraph (j)(2)(v) of this section.
(B) At each annual meeting, the officers must make a full report of the financial condition of the association and of its progress for the preceding year and must outline a program for the succeeding year.
(C) If the association’s bylaws provide for telephonic or electronic participation in member meetings, the association must follow the procedures for telephonic or electronic participation of the State corporate governance provisions it is permitted to elect pursuant to paragraph (j)(3)(ii) of this section, if those State corporate governance provisions include telephonic or electronic participation procedures; the Delaware General Corporation Law, Del. Code Ann. Tit. 8 (1991, as amended 1994, and as amended thereafter) (with “member” substituting for “stockholder”); or the Model Business Corporation Act (with “member” substituting for “shareholder”), provided, however, that such procedures are not inconsistent with applicable Federal statutes and regulations and safety and soundness. The association must indicate the use of these procedures in its bylaws.
(ii) Special meetings of members. Procedures for calling any special meeting of the members and for conducting such a meeting must be set forth in the bylaws. The board of directors of the association or the holders of 10 percent or more of the voting capital must be entitled to call a special meeting. The association’s bylaws may provide for telephonic or electronic participation of members at a special meeting pursuant to the procedures specified in paragraph (j)(2)(i)(C) of this section. Members participating in a special meeting telephonically or electronically will be deemed present in person for purposes of the quorum requirement in paragraph (j)(2)(v) of this section. For purposes of this paragraph, “voting capital” means FDIC-insured deposits as of the voting record date.
(iii) Notice of meeting of members. Notice specifying the date, time, and place of the annual or any special meeting and adequately describing any business to be conducted must be published for two successive weeks immediately prior to the week in which such meeting will convene in a newspaper of general circulation in the city or county in which the principal place of business of the association is located, or mailed postage prepaid at least 15 days and not more than 45 days prior to the date on which such meeting will convene to each of its members of record. A similar notice must be posted in a conspicuous place in each of the offices of the association during the 14 days immediately preceding the date on which such meeting will convene. The bylaws may permit a member to waive in writing any right to receive personal delivery of the notice. When any meeting is adjourned for 30 days or more, notice of the adjournment and reconvening of the meeting must be given as in the case of the original meeting.
(iv) Fixing of record date. The bylaws must provide for the fixing of a record date and a method for determining from the books of the association the members entitled to vote. Such date may not be more than 60 days nor fewer than 10 days prior to the date on which the action, requiring such determination of members, is to be taken. The same determination must apply to any adjourned meeting.
(v) Member quorum. Any number of members present and voting, represented in person or by proxy, at a regular or special meeting of the members constitutes a quorum. A majority of all votes cast at any meeting of the members determines any question, unless otherwise required by regulation. At any adjourned meeting, any business may be transacted that might have been transacted at the meeting as originally called. Members present at a duly constituted meeting may continue to transact business until adjournment.
(vi) Voting by proxy. Procedures must be established for voting at any annual or special meeting of the members by proxy pursuant to the rules and regulations of the OCC. Proxies may be given telephonically or electronically as long as the holder uses a procedure for verifying the identity of the member. All proxies with a term greater than eleven months or solicited at the expense of the association must run to the board of directors as a whole, or to a committee appointed by a majority of such board.
(vii) Communications between members. Provisions relating to communications between members must be consistent with § 144.8 of this chapter. No member, however, may have the right to inspect or copy any portion of any books or records of a Federal mutual savings association containing:
(A) A list of depositors in or borrowers from such association;
(B) Their addresses;
(C) Individual deposit or loan balances or records; or
(D) Any data from which such information could be reasonably constructed.
(viii) Number of directors, membership. The bylaws must set forth a specific number of directors, not a range. The number of directors may not be fewer than five nor more than fifteen, unless a higher or lower number has been authorized by the OTS prior to July 21, 2011 or by the OCC. Each director of the association must be a member of the association. Directors may be elected for periods of one to three years and until their successors are elected and qualified, but if a staggered board is chosen, provision must be made for the election of approximately one-third or one-half of the board each year, as appropriate. State-chartered savings banks converting to Federal savings banks may include alternative provisions for the election and term of office of directors so long as such provisions are authorized by the OCC, and provide for compliance with the standard provisions of this paragraph no later than six years after the conversion to a Federal savings association.
(ix) Meetings of the board. The board of directors determines the place, frequency, time, procedure for notice, which must be at least 24 hours unless waived by the directors, and waiver of notice for all regular and special meetings. The board also may permit telephonic or electronic participation at meetings. The bylaws may provide for action to be taken without a meeting if unanimous written consent is obtained for such action. A majority of the authorized directors constitutes a quorum for the transaction of business. The act of a majority of the directors present at any meeting at which there is a quorum will be the act of the board.
(x) Officers, employees and agents. (A) The bylaws must contain provisions regarding the officers of the association, their functions, duties, and powers. The officers of the association must consist of a president, one or more vice presidents, a secretary, and a treasurer or comptroller, each of whom must be elected annually by the board of directors. Such other officers and assistant officers and agents as may be deemed necessary may be elected or appointed by the board of directors or chosen in such other manner as may be prescribed in the bylaws. Any two or more offices may be held by the same person, except the offices of president and secretary.
(B) Any officer may be removed by the board of directors with or without cause, but such removal, other than for cause, must be without prejudice to the contractual rights, if any, of the person so removed. Termination for cause, for purposes of this section and § 5.22, includes termination because of the person’s personal dishonesty; incompetence; willful misconduct; breach of fiduciary duty involving personal profit; intentional failure to perform stated duties; willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease and desist order; or material breach of any provision of an employment contract.
(xi) Vacancies, resignation or removal of directors. In the event of a vacancy on the board, the board of directors may, by its affirmative vote, fill such vacancy, even if the remaining directors constitute less than a quorum. A director elected to fill a vacancy may serve only until the next election of directors by the members. The bylaws must set out the procedure for the resignation of a director. Directors may be removed only for cause, as defined in paragraph (j)(2)(x)(B) of this section, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors.
(xii) Powers of the board. The board of directors has the power to exercise any and all of the powers of the association not expressly reserved by the charter to the members.
(xiii) Nominations for directors. The bylaws must provide that nominations for directors may be made at the annual meeting by any member and must be voted upon, except, however, the bylaws may require that nominations by a member must be submitted to the secretary and then prominently posted in the principal place of business at least 10 days prior to the date of the annual meeting. However, if such provision is made for prior submission of nominations by a member, then the bylaws must provide for a nominating committee, which, except in the case of a nominee substituted as a result of death or other incapacity, must submit nominations to the secretary and have such nominations similarly posted at least 15 days prior to the date of the annual meeting.
(xiv) New business. The bylaws must provide procedures for the introduction of new business at the annual meeting.
(xv) Amendment. Bylaws may include any provision for their amendment that would be consistent with applicable law, rules, and regulations and adequately addresses its subject and purpose.
(A) Amendments will be effective:
(1) After approval by a majority vote of the authorized board, or by a majority of the vote cast by the members of the association at a legal meeting; and
(2) After receipt of any applicable regulatory approval.
(B) When an association fails to meet its quorum requirement, solely due to vacancies on the board, the bylaws may be amended by an affirmative vote of a majority of the sitting board.
(xvi) Miscellaneous. The bylaws also may address any other subjects necessary or appropriate for effective operation of the association.
(3) Form of filing—(i) Application requirement. Except as provided in paragraphs (j)(3)(ii) or (j)(3)(iii) of this section, a Federal mutual savings association must file the proposed bylaw amendment with, and obtain the prior approval of, the OCC.
(A) Expedited review. Except as provided in paragraph (j)(3)(i)(B) of this section, the bylaw amendment will be deemed approved as of the 30th day after filing, unless the OCC notifies the filer that the bylaw amendment is denied or that the amendment contains procedures of the type described in paragraph (j)(3)(i)(B) of this section and is not eligible for expedited review, provided the association follows the requirements of its charter and bylaws in adopting the amendment.
(B) Amendments not subject to expedited review. A bylaw amendment is not subject to expedited review if it would render more difficult or discourage a merger, proxy contest, the assumption of control by a mutual account holder of the association, or the removal of incumbent management; involve a significant issue of law or policy, including indemnification, conflicts of interest, and limitations on director or officer liability; or be inconsistent with the requirements of this paragraph or with applicable laws, rules, regulations, or the association’s charter.
(ii) Corporate governance election and notice requirement. A Federal mutual association may elect to follow the corporate governance provisions of the laws of any State in which the home office or any branch of the association is located, provided that such provisions are not inconsistent with applicable Federal statutes, regulations, and safety and soundness, and such provisions are not of the type described in paragraph (j)(3)(i)(B) of this section. If this election is selected, a Federal mutual association must designate in its bylaws the provision or provisions from the body of law selected for its corporate governance provisions, and must submit a notice containing a copy of such bylaws, within 30 days after adoption. The notice must indicate, where not obvious, why the bylaw provisions meet the requirements stated in paragraph (j)(3)(i)(B) of this section.
(iii) No filing required. No filing is required for purposes of paragraph (j)(3) of this section if a bylaw amendment adopts the language of the OCC’s model or optional bylaws without change.
(4) Effectiveness. A bylaw amendment is effective after approval by the OCC, if required, and adoption by the association, provided that the association follows the requirements of its charter and bylaws in adopting the amendment.
(5) Effect of subsequent charter or bylaw change. Notwithstanding any subsequent change to its charter or bylaws, the authority of a Federal mutual savings association to engage in any transaction is determined only by the association’s charter or bylaws then in effect.